An anti-government protester carries a flag in front of tires being burned near an intersection in Bangkok on April 13, 2009. Photographer: Udo Weitz/Bloomberg News By Shanthy Nambair and Shamim Adam
April 14 (Bloomberg) -- As Thailand descended into chaos over the weekend, forcing a dozen Asian leaders to flee, one protest banner summed up the national divide: “Stop Privy Council Rule, Bring Back True Democracy.”
The words captured the underlying feud between the rural poor, who in 2001 voted in an unlikely champion in billionaire Thaksin Shinawatra, and the Bangkok elite, embodied by King Bhumibol Adulyadej’s advisers on the council, whom they blame for the 2006 coup that removed Thaksin.
Thaksin’s supporters have taken to the streets aiming to oust U.K.-born and Oxford-educated Prime Minister Abhisit Vejjajiva, the face of the establishment for them. Clashes with troops in Bangkok yesterday left two dead and at least 123 people injured and led Australia and Britain to warn their citizens to avoid Thailand. The clashes came one day after the government declared its third emergency decree since September.
“Many people feel that the outcome in Thai politics is determined by an old elite, and this is something that they are protesting against,” said Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok. “This time, the protesters are going against the establishment, not just Abhisit.”
The prospect of prolonged unrest threatens to deter foreign investment just as the Thai economy confronts its first annual contraction in 11 years. Thailand’s tourism industry leaders will meet tomorrow to review their target of 14 million arrivals this year and will likely cut it, Juthaporn Rerngronasa, deputy governor, of the state-run Tourism Authority of Thailand said.
Ratings Impact
Fitch Ratings today joined Moody’s Investors Service and Standard & Poor’s in saying they may cut the nation’s foreign- currency debt ratings as the continued instability hurts tourism revenue and spurs capital outflows. Fitch and S&P have BBB+ ratings for Thailand, a level similar to Moody’s.
“The costs of this political turmoil are rising and the economy will be hit badly,” said Tetsuji Sano, a Singapore- based economist at Nomura Holdings Inc. “Foreigners are losing confidence, companies will be more reluctant to invest and tourists will choose to go somewhere else.”
The latest crisis erupted when pro-Thaksin supporters, clad in red to set themselves apart from their opponents, stormed the Association of Southeast Asian Nations summit in the resort town of Pattaya on April 10.
Abhisit, 44, was forced to cancel the meetings, a personal humiliation that also prevented regional leaders from discussing joint methods to combat the global financial crisis.
Uneasy Standoff
This morning, the protests had devolved into an uneasy standoff between army troops and demonstrators outside the Government House compound where the premier’s office is located. The soldiers sat and watched protesters who have set up what amounts to a market with stands selling barbecued food, first- aid supplies, soft drinks and souvenirs.
“Our top priority is to bring the country back to normal,” Abhisit said in a nationally broadcast address yesterday. “We have no intention of harming anybody.”
Thaksin, living in exile to escape a prison sentence for a corruption conviction, told supporters he was prepared to return to Thailand immediately in comments that were broadcast on the nation’s PBS television channel.
The former tycoon-turned-politician won two elections on support from Thailand’s poorest region by slashing health-care costs and handing out cheap loans. At the same time, Thaksin enraged the royalist elite by helping companies he owned and promoting friends in key government institutions.
Thaksin’s former wife and her brother were sentenced last year to jail for tax evasion.
Forecast in Doubt
Thai Finance Minister Korn Chatikavanij today said the government will lower its forecast that the economy will contract 3 percent this year as demonstrations disrupt tourism and investment.
The size of the cut will depend on how long it takes to return the country to “normalcy,” Korn said in a Bloomberg Television interview. Protests have made reviving the economy a harder task, he said.
Consumer sentiment is at the lowest in more than seven years, and the government predicts unemployment will double as companies including the local unit of Toyota Motor Corp. fire workers.
“If the violence spreads further and if Yellow Shirt protesters also take to the streets, things can turn ugly,” said Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore, referring to yellow-clad government backers. She predicts a 3.5 percent contraction in 2009.
The Bank of Thailand has reduced its benchmark interest rate to the lowest level since July 2004 to stem the economy’s decline. The central bank cut the one-day bond repurchase rate by 25 basis points to 1.25 percent on April 8, adding to its most aggressive reductions ever.
Government Spending
The government has said it will spend about 1.57 trillion baht ($44 billion) over three years, mainly on infrastructure projects, to help create jobs and spur growth. The spending may now be delayed by political uncertainty, said Nomura’s Sano.
Thailand has experienced 10 successful coups since absolute monarchy was abolished in 1932. Only two of Thailand’s constitutions since then have mandated fully elected parliaments.
During his six decades on the throne, Bhumibol, 81, has achieved near god-like status. Criticizing him or his family is a crime. Earlier this month, a 34-year-old Thai blogger was sentenced to 10 years in prison for doctoring photos of the king and posting them on the Internet.
The king is head of state under Thailand’s constitution, while the prime minister and parliament govern. Bhumibol’s rare comments on public events have ended past conflicts, notably in May 1992 when government troops killed and wounded dozens of pro-democracy protesters in Bangkok’s streets.
Constitution Changed
After the 2006 coup, the military rewrote the constitution to favor non-elected institutions and make it easier for judges to dissolve political parties. Thaksin’s supporters won a December 2007 election to restore democracy, only to see the courts remove two successive prime ministers. Abhisit took office at the end of last year after demonstrators who supported him shut down the country’s airports for eight days and a court dissolved the previous ruling party for vote-buying.
More than 100,000 Red Shirts on April 8 rallied outside the home of the king’s top adviser, Prem Tinsulanonda, demanding that he and two colleagues step down. Prem, 88, a former prime minister and army chief, denies allegations that he was behind the coup that toppled Thaksin.
“In the near term, the best way to avoid violence is for Abhisit to call an election,” said Kanin Boonsuwan, a constitutional law professor at Chulalongkorn University. “Longer term, the constitution needs to change to give more power to elected representatives.”
To contact the reporters on this story:
Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net;
Shamim Adam in Bangkok at sadam2@bloomberg.net
The words captured the underlying feud between the rural poor, who in 2001 voted in an unlikely champion in billionaire Thaksin Shinawatra, and the Bangkok elite, embodied by King Bhumibol Adulyadej’s advisers on the council, whom they blame for the 2006 coup that removed Thaksin.
Thaksin’s supporters have taken to the streets aiming to oust U.K.-born and Oxford-educated Prime Minister Abhisit Vejjajiva, the face of the establishment for them. Clashes with troops in Bangkok yesterday left two dead and at least 123 people injured and led Australia and Britain to warn their citizens to avoid Thailand. The clashes came one day after the government declared its third emergency decree since September.
“Many people feel that the outcome in Thai politics is determined by an old elite, and this is something that they are protesting against,” said Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok. “This time, the protesters are going against the establishment, not just Abhisit.”
The prospect of prolonged unrest threatens to deter foreign investment just as the Thai economy confronts its first annual contraction in 11 years. Thailand’s tourism industry leaders will meet tomorrow to review their target of 14 million arrivals this year and will likely cut it, Juthaporn Rerngronasa, deputy governor, of the state-run Tourism Authority of Thailand said.
Ratings Impact
Fitch Ratings today joined Moody’s Investors Service and Standard & Poor’s in saying they may cut the nation’s foreign- currency debt ratings as the continued instability hurts tourism revenue and spurs capital outflows. Fitch and S&P have BBB+ ratings for Thailand, a level similar to Moody’s.
“The costs of this political turmoil are rising and the economy will be hit badly,” said Tetsuji Sano, a Singapore- based economist at Nomura Holdings Inc. “Foreigners are losing confidence, companies will be more reluctant to invest and tourists will choose to go somewhere else.”
The latest crisis erupted when pro-Thaksin supporters, clad in red to set themselves apart from their opponents, stormed the Association of Southeast Asian Nations summit in the resort town of Pattaya on April 10.
Abhisit, 44, was forced to cancel the meetings, a personal humiliation that also prevented regional leaders from discussing joint methods to combat the global financial crisis.
Uneasy Standoff
This morning, the protests had devolved into an uneasy standoff between army troops and demonstrators outside the Government House compound where the premier’s office is located. The soldiers sat and watched protesters who have set up what amounts to a market with stands selling barbecued food, first- aid supplies, soft drinks and souvenirs.
“Our top priority is to bring the country back to normal,” Abhisit said in a nationally broadcast address yesterday. “We have no intention of harming anybody.”
Thaksin, living in exile to escape a prison sentence for a corruption conviction, told supporters he was prepared to return to Thailand immediately in comments that were broadcast on the nation’s PBS television channel.
The former tycoon-turned-politician won two elections on support from Thailand’s poorest region by slashing health-care costs and handing out cheap loans. At the same time, Thaksin enraged the royalist elite by helping companies he owned and promoting friends in key government institutions.
Thaksin’s former wife and her brother were sentenced last year to jail for tax evasion.
Forecast in Doubt
Thai Finance Minister Korn Chatikavanij today said the government will lower its forecast that the economy will contract 3 percent this year as demonstrations disrupt tourism and investment.
The size of the cut will depend on how long it takes to return the country to “normalcy,” Korn said in a Bloomberg Television interview. Protests have made reviving the economy a harder task, he said.
Consumer sentiment is at the lowest in more than seven years, and the government predicts unemployment will double as companies including the local unit of Toyota Motor Corp. fire workers.
“If the violence spreads further and if Yellow Shirt protesters also take to the streets, things can turn ugly,” said Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore, referring to yellow-clad government backers. She predicts a 3.5 percent contraction in 2009.
The Bank of Thailand has reduced its benchmark interest rate to the lowest level since July 2004 to stem the economy’s decline. The central bank cut the one-day bond repurchase rate by 25 basis points to 1.25 percent on April 8, adding to its most aggressive reductions ever.
Government Spending
The government has said it will spend about 1.57 trillion baht ($44 billion) over three years, mainly on infrastructure projects, to help create jobs and spur growth. The spending may now be delayed by political uncertainty, said Nomura’s Sano.
Thailand has experienced 10 successful coups since absolute monarchy was abolished in 1932. Only two of Thailand’s constitutions since then have mandated fully elected parliaments.
During his six decades on the throne, Bhumibol, 81, has achieved near god-like status. Criticizing him or his family is a crime. Earlier this month, a 34-year-old Thai blogger was sentenced to 10 years in prison for doctoring photos of the king and posting them on the Internet.
The king is head of state under Thailand’s constitution, while the prime minister and parliament govern. Bhumibol’s rare comments on public events have ended past conflicts, notably in May 1992 when government troops killed and wounded dozens of pro-democracy protesters in Bangkok’s streets.
Constitution Changed
After the 2006 coup, the military rewrote the constitution to favor non-elected institutions and make it easier for judges to dissolve political parties. Thaksin’s supporters won a December 2007 election to restore democracy, only to see the courts remove two successive prime ministers. Abhisit took office at the end of last year after demonstrators who supported him shut down the country’s airports for eight days and a court dissolved the previous ruling party for vote-buying.
More than 100,000 Red Shirts on April 8 rallied outside the home of the king’s top adviser, Prem Tinsulanonda, demanding that he and two colleagues step down. Prem, 88, a former prime minister and army chief, denies allegations that he was behind the coup that toppled Thaksin.
“In the near term, the best way to avoid violence is for Abhisit to call an election,” said Kanin Boonsuwan, a constitutional law professor at Chulalongkorn University. “Longer term, the constitution needs to change to give more power to elected representatives.”
To contact the reporters on this story:
Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net;
Shamim Adam in Bangkok at sadam2@bloomberg.net
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